GTI President, Dissident Split Over Liquidation Move

Not surprisingly, GTI President James La Fleur and H. Lee Rust, who is leading a dissident group of shareholders that recently gained control of more than 5% of GTI’s stock, have differing views on GTI’s decision last Friday to liquidate itself.

“You might say I’m organizing myself out of a job,” La Fleur said Monday. “But we think it’s the right thing to do.

“I don’t believe (the divisions) need me, so my job is essentially finished,” explained La Fleur, who, since being chosen president in 1975, has eliminated seven GTI divisions. “Over the past several years it’s become obvious that our (remaining) divisions would do best if they were left to manage their own businesses.”

Liquidation is “management’s tacit admission of its inability to manage GTI’s assets to maximize profits,” countered Rust, president of Baldwin, Rust & Dizney Inc., a corporate finance and investment banking firm in Orlando, Fla.

Rust, who during a meeting last month asked GTI to give his group three seats on GTI’s board and to hire a group representative as an operations vice president, on Monday all but ruled out a court challenge that would stall or stop the liquidation.

“I think that GTI shareholders are simply tired of hearing about GTI,” said Rust, who again questioned the logic of GTI’s board to sell off production facilities in San Diego, Hadley, Pa.; Leesburg, Ind., and Abbeyfeale, Ireland.

On Monday, the market responded to GTI’s announcement by pushing GTI’s stock up one-half to 2 3/4.

To La Fleur, the stock activity was a “positive reaction” that reinforced the board’s decision.

“I’d hardly call (Monday’s activity) substantial,” said Rust, referring to GTI’s Friday announcement that described the worth of GTI’s divisions at “substantially” more than the current market valuation.

“Although people seem to be saying ‘Yeah, maybe the divisions are worth more than the stock price,’ (the stock movement) doesn’t indicate much confidence in management’s ability to conduct the transactions,” Rust said.

For La Fleur, who took over a company with 11 divisions in 1975, the liquidation represented the end of a gradual consolidation in which GTI “got rid of the bad properties and rebuilt others.

“I wanted to get down to one, nice, efficient manufacturing company because (the remaining four) are in distinctly separate businesses,” said La Fleur, who added that “the corporate structure was no longer contributing to the well-being of the remaining business.”

In contrast, during a meeting last month with La Fleur, Rust’s group suggested that GTI “broaden the market base of its individual businesses and consider expansion into new territory,” Rust said.

“They didn’t want to listen to our suggestions,” said Rust, who described his investment banking company as having participated in successful turnarounds at a half-dozen other companies.

Even with just six people on GTI’s San Diego staff, La Fleur said, corporate overhead--including his salary--hit more than $1 million during the past year.

He pointed to a directors and officers’ insurance policy, with premiums that recently skyrocketed from $6,000 per year to $200,000, as a cost that was hurting the operating divisions.

“Our manager (at GTI’ automotive electronics plant in Indiana) gets no help from me,” La Fleur said. “He’s a nice fellow, and we play golf once in a while, but it’s been apparent for the last couple of years that all he’s doing (with GTI) is sending the profits back here.”

Even though Rust’s group made a “very substantial” investment in GTI, it likely will not sue to stop the liquidation.

“(GTI) won’t be the great investment which we thought it could have been, but it will be a fair investment,” said Rust, downplaying industry speculation that his group’s recent appearance pushed GTI management to liquidate the company rather than surrender their management roles. “I don’t think (the liquidation plan) had anything to do with us. They had this plan in place a long time before we ever met with them.”